Today CreditMate encapsulates the journey of every successful Indian startup. From a cautious start to successful pivot and then eventually setting a strong foothold in a thriving business. Initially started as vehicle finance startup, today CreditMate is busy solving a problem that has assumed critical importance in India’s critical quest of achieving higher economic growth-rate. The problem of non-performing assets (NPAs).
CreditMate’s co-founders Jonathan Bill (CEO) and Swati Lad (CMO) thought of solving intricately complex problem of NPAs when they realized that their young company’s true strength lies in ‘credit collection.’ This realization also made both co-founders took note of the enormous opportunity in India’s credit lending market.
Just to give a rough idea of the opportunity that Bill and Swati pounced upon then whopping 200 million consumer loans are disbursed in India annually. A substantial percentage of these 200 million credit eventually turns into NPAs owing to inefficient credit collections.
Now it was only matter of time that CreditMate would make a successful pivot and help India’s credit industry to grow faster. At this critical juncture, most startups would conventionally welcome fresh infusion of capital and more importantly a helpful investor. And Jonathan and Swati probably could not have asked for a more prominent investor than Paytm – India’s largest digital payment company.
Vijay Shekhar Sharma’s company invested undisclosed amount in 2017 to acquire a substantial stake in CreditMate. Last year, Paytm invested $10 Mn more and thereby reposed its deep faith in this young Mumbai based company.
Techpluto caught up with CreditMate’s co-founder and CEO Jonathan Bill to know about how CreditMate is going about in helping India’s credit industry to collect faster and better. In the process, Bill has also shed light on CreditMate’s growth prospects and about the overall credit industry in this special interview.
Q) CreditMate initially began as a vehicle financier and then eventually pivoted to debt collection startup. What were the factors that led to this pivot?
We are a bunch of technology, product, data and marketing folks. Whilst we had solved a problem in credit distribution at retail and solid underwriting, we were hungry to make a real difference at a National Level and not to be one of the myriad of fintech lenders. When we assessed our lending performance, we realized that our collection capabilities were the key – so we looked at that problem closely. What we found was both astonishing and an enormous opportunity:
Every month in India, 10% to 15% of loan repayments fail to be collected from bank accounts on due date which contributes to 11% NPA at a country level putting 100s of billions of dollars at risk. This also leads to poor borrower experience and extensive MIS work. Data security is almost nonexistent – the end agents working in the collection agencies are not checked for their background and the data is shared in Excel on email due to which customer information is open which contributes to further risk not to mention no policing of communication quality and borrower experience. Plus the cost of all of this directly is over $5bn a year and indirectly 10s of $ billions.
We believed this issue could be effectively addressed with the use of technology. In addition, for our fintech colleagues in particular, we are filling gaps in collection coverage, especially in rural areas, with our large feet-on-street (FOS) network. This allows lenders, who are new to certain geography, to lend with confidence.
Q) Paytm is one of your prominent investors. What has been the impact of having a prominent brand like Paytm on the company’s board?
We love having Paytm on board – highly supportive, hands off except for where we ask for help. Deep understanding of mass India and, most critically, entrepreneurs who understand our pressures and plans. Plus, of course, one of the largest networks of users and merchants in the country.
Q) Can you please shed some light on your three flagship products – CreditMate Collect, CreditMate Pay and CreditMate Score?
CreditMate is building automation and light touch in collections using technology – we seek to make collections more intuitive, faster and lower cost. We also try to provide Self Service and Self resolution – this is key – the overwhelming majority of borrowers are well intended and honest. There are 3 components to this:
- CreditMate Collect
CreditMate Collect is a collecting platform equipped with Application Program Interface (API) driven integration, which provides real-time tracking of payment status, payment integration across gateways and customised regional communication. The platform is based on behavioural and sentiment analysis that ensures a smooth collection strategy.
- CreditMate Pay
CreditMate Pay is an offline, secure network that offers borrowers options to pay their EMIs via various digital payment solutions such as UPI and eNACH mandate setup. The offline system is backed by an extensive network of cash-drop points across the country and 1,000+ executives for cash pickups.
- CreditMate Score
CreditMate Score is being developed to predict the lifetime cost of collecting from a prospective borrower. We know, from experience, the cost of servicing and collecting can end up eating up all margin for lenders. Much more than the credit score (will this person default) our score is more of a measure of before I sign this customer what are the likely economics. This is critical.
Q) CreditMate recently launched ML algorithm ‘Sherlock’ to optimize debt collection. Can you please share some details about the same?
Sherlock, the latest in our suite of products, brings the power of technology to what has historically been a low or no-tech activity. Sherlock uses a proprietary Machine Learning algorithm to score debt defaulters, manage debt resolution processes and optimise results and costs. Debt collections are fundamentally crucial for the health of lenders as well as to lower NPAs currently affecting the financial sector. By using data science, we are able to improve debt resolution rates, reduce costs for lenders and improve their performance, and empower borrowers with better credit scores.
Q) CreditMate recently claimed that it witnessed 15-20 percent increase in the resolutions for early-stage delinquencies for its lender clients. How did you go about achieving this target?
In essence our strategies follow this methodology:
Propensity / Intent, Contactability and quality of address, proximity (location), status and amount owed. By using ML and Data Science we are able to combine all of these to suggest an approach for resolution and to give the strategies to our network of callers, FOS partners etc.
Currently all data and learning around how collections happen is lost because systems and processes are offline. Our system is closed loop so every resolution that happens becomes a new data point and informs the next resolution. We are at around 250,000 collections already and growing at 50% a month.
Q) Where does the company currently stands in terms of profitability and revenue. Can you please share some statistics with regards to the same?
We will hit operating profit in March 2020 – our “AUM” is currently around $85M across both our SaaS model and our Full Service Model and our growth is currently > 50% a month on all measures.
Q) Where do you see CreditMate in next 2-3 years from now?
- Considering there are 200 million consumer loans disbursed in India annually, the opportunity for us is huge. We are looking at a massive lending market, growing at 28 percent in the next few years.
- We also plan to add several new capabilities to our platform because we believe that “lenders should be focused on lending”. Others can take care of collections.
The problem of collections is consistent across many geographies and our platform is built for scale so we will deploy in SE Asia and Europe in this timeframe
Q) Your take on the current market opportunity and the long term future of the industry?
We are market makers – for sure the market of collections is not declining – in fact, especially with economic downturns, collecting back what has been leant is ever more critical
Q) Currently, who are your main competitors in the market?
Currently we are the only tech based collection platform player in the market.
Q) CreditMate deals with the NPA issue and therefore I would like to ask what do you make of the entire buzz around the NPA issue with regards to liquidity crunch in the financial market and the subsequent economic slowdown?
NPA is a real issue. It is manageable, however requires preventative measures and, we believe, continual improvement to prevent “flow” from collections into NPA.